Business Combinations

9 Months Ended

Sep. 30, 2022

Business Combinations

Business Combinations

6. Business combinations

All of the Company’s acquisitions of business have been accounted for under ASC 805, Business Combinations. Accordingly, the assets of the acquired companies reflect the fair values and have been included in the Company’s Condensed Financial Statements from their respective dates of acquisition.

The results of operations of Pulse Veterinary Technologies, LLC, Revo Squared LLC, and Assisi Animal Health, LLC have been included in the Company’s Condensed Financial Statements since the dates of acquisition on October 1, 2021, June 14, 2022, and July 15, 2022, respectively.

2022 Acquisitions

Asset Purchase Agreement with Assisi Animal Health LLC

On July 15, 2022 (the “Effective Date”), Zomedica Corp. (the “Company”) and its wholly-owned subsidiary Zomedica Inc. entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Assisi Animal Health LLC (“Assisi”), its wholly-owned subsidiary, AAH Holdings LLC (“AAH Holdings,” and together with Assisi as the “Sellers”), and certain of Assisi’s members (the Sellers and such Assisi members are collectively referred to herein as the “Selling Parties”) pursuant to which Zomedica Inc. agreed to acquire substantially all of the assets of the Sellers (the “Acquisition”). The Sellers are in the business of developing, manufacturing, marketing, distributing and selling animal health products which use targeted Pulsed Electromagnetic Field (PEMF) therapy to decrease pain and inflammation, accelerate healing, and reduce anxiety that include the Assisi Loop®, Assisi Loop Lounge®, Assisi DentaLoop® and Calmer Canine® product lines. The Acquisition was consummated on the Effective Date (the “Closing Date”)

At the closing, Zomedica Inc. paid Assisi a purchase price of $18,293 in cash, which was subject to adjustments based on, among other things, the value of Assisi’s inventory and prepaid expenses at the closing of the Acquisition. $1,400 of the purchase price was deposited into a third-party escrow account to support the Selling Parties’ indemnification obligation under the Purchase Agreement, of which $500 and $900 will be distributed to Assisi on the one-year and 18-month anniversary of the Closing Date, respectively, less the amount of prior or pending indemnification claims. An additional $200 of the purchase price was deposited into the escrow account for a period of approximately 90 days to support payment of post-closing adjustments to the purchase price, if any. The Company also issued to Assisi a ten-year warrant to purchase an aggregate of 22,000,000 of the Company’s common shares at a per share exercise price equal to $0.252. The warrants may be exercised on a cash or cashless basis, at the election of the warrant holder.

As a result of total consideration exceeding the preliminary fair value of the net assets acquired, goodwill in the amount of $14,329 was recorded in connection with this acquisition, none of which will be deductible for US tax purposes. The goodwill largely results from our ability to market and sell their respective products and services through our established customer base.

The Company made a preliminary allocation of the purchase price for Assisi Animal Health LLC’s asset base based on its understanding of the fair value of the acquired assets and assumed liabilities. As the Company continues to obtain additional information about these assets and liabilities, including intangible asset appraisals, inventory valuation, and accrued expenses, and continues to integrate the newly acquired business, the Company will refine the estimates of fair value and more accurately allocate the purchase price. Only items identified as of the acquisition date are considered for subsequent adjustment. The Company will continue to make required adjustments to the purchase price allocation prior to the completion of the acquisition period.

The following table summarizes the preliminary acquisition date fair values of the assets acquired and liabilities assumed and subsequent initial period adjustments:

	Initial
	Allocation of
	Consideration
Inventory, net	$	220
Prepaid expenses and deposits		271
Other receivables		406
Intangible Assets (estimated useful life)
Customer relationships (19 years)		2,800
Developed technology (10 years)		4,500
E-commerce technology (2 years)		200
Trade name (5 years)		300
Total assets acquired		8,697
Other non current liabilities		45
Total liabilities assumed		45
Net assets acquired, excluding goodwill		8,652
Goodwill		14,329
Net assets acquired	$	22,981

Purchase price consideration was made up of the following:

Cash	$	18,293
Fair value of warrants	$	4,688
Total	$	22,981

The determination of the final purchase price allocation to specific assets and liabilities assumed is incomplete. The purchase price allocation may change in future periods as the fair value estimates of the assets (including intangibles) and liabilities are adjusted.

The following table provides unaudited proforma financial information, prepared in accordance with Topic 805, for the 3 and 9 months ended September 30, 2022, and 2021, as if Assisi had been acquired as of January 1, 2021. Proforma results do not include the effect of any synergies anticipated to be achieved from the acquisition, and accordingly, are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the date indicated or that may result in the future.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
		2022		2021		2022		2021
Net Revenue	$	5,086	$	1,330	$	15,681	$	3,652
Net Losses	$	(4,995)	$	(6,512)	$	(14,845)	$	(15,286)

The proforma amounts have been calculated by including the results of Assisi, and adjusting the combined results to give effect to the following, as if the acquisitions had been consummated on January 1, 2021, together with the consequential tax effects thereon:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
		2022		2021		2022		2021
Adjustments to net revenues
Assisi preacquisition revenues	$	310	$	1,307	$	2,908	$	3,600
Adjustments to net income
Assisi preacquisition net losses	$	-	$	(167)	$	(639)	$	(193)

Asset Purchase Agreement with Revo Squared LLC

On June 14, 2022, Zomedica Corp. (“Company”) and its wholly-owned subsidiary Zomedica Inc. entered into an Asset Purchase Agreement (“Purchase Agreement”) with Revo Squared LLC (“Revo Squared”) and its majority member (Revo Squared and its majority member are referred to herein as the “Selling Parties”) pursuant to which Zomedica Inc. agreed to acquire substantially all of the assets of Revo Squared (“Acquisition”). Revo Squared, based in Marietta, Georgia, is in the business of developing, manufacturing, marketing, distributing, and selling diagnostic imaging products and services for use in animal health, including its SuperView, Sonoview Color, Sonoview Mini/Mini Plus and Microview product offerings (the “Revo Squared Products”).

On July 1, 2022, the parties consummated the Acquisition. At the closing, Zomedica Inc. paid Revo Squared a base purchase price of $6,011 in cash, which was subject to adjustments based on the amount of Revo Squared’s working capital at the closing. On this date, $500 of the purchase price was deposited into a third-party escrow account for a period of 15 months to support Revo Squared’s indemnification obligation under the Purchase Agreement and an additional $50 of the purchase price was deposited into the escrow account for a period of approximately 90 days to support payment of post-closing adjustments to the purchase price, if any. The Company also issued to Revo Squared a ten-year warrant to purchase an aggregate of 10,000,000 of the Company’s common shares at a per share exercise price equal to $0.2201. Zomedica Inc. has agreed to pay Revo Squared aggregate earn-out payments of up to $4,000 based on the achievement of milestones related to future net sales from Revo Squared Products. One-time earn-out payments of $2,000 each will be payable upon net sales from Revo Squared Products exceeding $5,000 and $10,000 during any calendar year ending on or prior to December 31, 2027.

As a result of total consideration exceeding the preliminary fair value of the net assets acquired, goodwill in the amount of $6,528 was recorded in connection with this acquisition, which will be deductible for US tax purposes. The goodwill largely results from our ability to market and sell their respective products and services through our established customer base.

The Company made a preliminary allocation of the purchase price for Revo Squared’s asset base based on its understanding of the fair value of the acquired assets and assumed liabilities. As the Company continues to obtain additional information about these assets and liabilities, including intangible asset appraisals, inventory valuation, and accrued expenses, and continues to integrate the newly acquired business, the Company will refine the estimates of fair value and more accurately allocate the purchase price. Only items identified as of the acquisition date are considered for subsequent adjustment. The Company will continue to make required adjustments to the purchase price allocation prior to the completion of the acquisition period.

The following table summarizes the preliminary acquisition date fair values of the assets acquired and liabilities assumed and subsequent initial period adjustments:

	Initial
	Allocation of
	Consideration
Trade receivables, net	$	8
Prepaid expenses and deposits		10
Intangible Assets (estimated useful life)
Customer relationships (16 years)		1,200
Developed technology (10 years)		2,300
Trade name (5 years)		200
Total assets acquired		3,718
Earnout liabilities		2,458
Total liabilities assumed		2,458
Net assets acquired, excluding goodwill		1,260
Goodwill		6,528
Net assets acquired	$	7,788

Purchase price consideration was made up of the following:

Cash	$	6,011
Fair value of warrants	$	1,777
Total	$	7,788

The determination of the final purchase price allocation to specific assets and liabilities assumed is incomplete. The purchase price allocation may change in future periods as the fair value estimates of the assets (including intangibles) and liabilities are adjusted.

2021 Acquisitions

Acquisition of PulseVet®

On October 1, 2021, Zomedica Inc., a wholly-owned subsidiary of Zomedica Corp. (the “Company”), entered into a Stock Purchase Agreement with Branford PVT Mid-Hold, LLC pursuant to which Zomedica Inc. acquired 100% of the capital stock of Branford PVT Acquiror, Inc., a Delaware corporation (“BPA”). BPA is a holding company whose direct and indirect wholly-owned subsidiaries include Pulse Veterinary Technologies, LLC (“PulseVet”), which, together with its consolidated subsidiaries, is a leading provider of non-invasive shock wave therapy treatment devices to the veterinary industry (the “Acquisition”). The purchase price for the acquisition was $71,929 in cash.

As a result of total consideration exceeding the preliminary fair value of the net assets acquired, goodwill in the amount of $44,915 was recorded in connection with this acquisition, none of which will be deductible for U.S tax purposes. The goodwill largely results from our ability to market and sell the PulseVet Technology through our established customer base.

The Company finalized the allocation of the purchase price for PulseVet as of the acquisition date based on its understanding of the fair value of the acquired assets and assumed liabilities.

The final allocation of the purchase price to the assets acquired and liabilities assumed, based on their estimated fair values at the acquisition date, is as follows

	Initial		Measurement
	Allocation of		Period		Updated
	Consideration		Adjustments		Allocation
Cash and cash equivalents	$	526	$	3	$	529
Trade receivables		269		—		269
Inventory		840		31		871
Prepaid expenses and deposits		365		—		365
Other receivables		—		150		150
Property and equipment		125		—		125
Intangible Assets (estimated useful life)
Customer relationships (11 years)		22,650		—		22,650
Developed technology (15 years)		8,650		—		8,650
Trade name (19 years)		2,350		—		2,350
Other Assets		69		265		334
Total assets acquired		35,844		449		36,293
Accounts payable and accrued liabilities		1,112		(543)		569
Income tax payable		44		—		44
Deferred revenue		61		—		61
Liability for contracts with customers		332		—		332
Deferred tax liabilities		7,138		(814)		6,324
Other non current liabilities		143		265		408
Total liabilities assumed		8,830		(1,092)		7,738
Net assets acquired, excluding goodwill		27,014		1,541		28,555
Goodwill		44,915		(1,541)		43,374
Net assets acquired	$	71,929	$	—	$	71,929